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Flight to Quality Begins

As the real estate cycle dips in the midst of the credit crunch, expect investors to pull back from secondary and tertiary markets and continue to focus on the handful of global gateways. Values will hold up better in New York, Washington, D.C., San Francisco, West LA, and Seattle where capital has been...

By Jonathan D. Miller | Updated on January 08, 2008

As the real estate cycle dips in the midst of the credit crunch, expect investors to pull back from secondary and tertiary markets and continue to focus on the handful of global gateways. Values will hold up better in New York, Washington, D.C., San Francisco, West LA, and Seattle where capital has been concentrating. These markets boast diversified tenant bases with international reach.

When the economy slows, hot growth markets — Atlanta, Dallas, Phoenix, Denver — tend to cool off more quickly, getting caught with oversupply as demand shrinks. The OC and much of Florida, meanwhile, feel the side-effects of slumping housing and condo markets. Midwest manufacturing centers appear most vulnerable — already hurting in good times, most capital red lines these markets in bad.

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